Benchimol J., & Bounader L., (2018). Optimal Monetary Policy Under Bounded Rationality

Optimal Monetary Policy Under Bounded Rationality
By : Benchimol Jonathan & Bounader Lahcen

Abstract : Optimal monetary policy under discretion, commitment, and optimal simple rules regimes is analyzed through a behavioral New Keynesian model. Flexible price level targeting dominates under discretion; flexible inflation targeting dominates under commitment; and strict price level targeting dominates when using optimal simple rules. Stabilizing properties and bounded rationality-independence generally affect the regime's optimality. The policymaker's knowledge of an agent's myopia is decisive, whereas bounded rationality is not necessarily associated with decreased welfare. Several forms of economic inattention can be welfare increasing.

JEL codes: C53, E37, E52, D01, D11.

To cite this article :  
Benchimol, Jonathan & Bounader, Lahcen, 2018. "Optimal Monetary Policy Under Bounded Rationality," Globalization and Monetary Policy Institute Working Paper 336, Federal Reserve Bank of Dallas.

Benchimol, Jonathan & Bounader, Lahcen, 2018. "Optimal monetary policy under bounded rationality," Research Discussion Papers 9/2018, Bank of Finland.

To download a full-text article : Optimal monetary policy under bounded rationality

Lahcen Bounader
Ph.D Student at Mohammed V University (LEA)

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